Beginning July 1, 2010, an oil and gas regulatory cost
recovery assessment is imposed on a well owner (Ohio Revised
Code 1509.50(A)). An owner must pay the assessment in
the same manner as a severer who is required to file a return
under the severance tax law. However, an owner may designate
a severer who must pay the owner’s assessment on behalf of
the owner on the return that the severer is required to file
under the severance tax law. If a severer so pays an
owner’s assessment, the severer may recoup from the owner the
amount of the assessment. Except in the case of a well
that becomes an exempt domestic well on or after July, 1,
2010, the assessment imposed is in addition to the taxes
levied on the severance of oil and gas under the severance
tax law (R.C. 1509.50(A)). Wells designated as domestic
exempt prior to July 1, 2010, are not subject to the
assessment.

An owner or severer that is liable for the amounts due from
the oil and gas regulatory cost recovery assessment uses the
same return for the assessment that is prescribed by the Tax
Commissioner under the severance tax law for the return of
severance taxes. Form SV 3A - “Oil and Natural Gas
Regulatory Cost Recovery Schedule” is used to compute the
assessment that is carried to line 14 of Form SV 3 – “Ohio
Severance Tax Return.”

The oil and gas regulatory cost recovery assessment is
calculated on a quarterly basis, except in the case of an
exempt domestic well (see below). The following
information is required to complete Form SV 3A and determine
the amount of the oil and gas well assessment:

The amount of oil and natural gas severance taxes paid
from Form SV 3, lines 7 and 8, Column 4.

The amount of oil and natural gas production from Form SV
3, lines 7 and 8, Column 2. The assessment based on
production is based on rates of $0.10/barrel of oil and
$0.005/mcf of natural gas.

The total number of wells owned or being reported by the
severer on behalf an owner. The minimum assessment amount is
$15.00/well.

The amount of severance taxes are added to the assessment
based on production. The resulting sum is compared to
the minimum assessment amount. The severance taxes are
subtracted from the greater of the two amounts to arrive at
the assessment amount due. The assessment amount due is
carried to Form SV 3, line 14.

The oil and gas regulatory cost recovery assessment for a
well that becomes an exempt domestic well on and after July
1, 2010, is $60 to be paid to the Division of Mineral
Resources Management on July 1 each year (R.C.
1509.50(B)(2)).

Revised Forms SV 3 and SV 3A will be available on the
department’s Web site within the next week or so.

Please visit the Ohio Department of Natural Resources, using
the link provided below, to obtain additional information on
Substitute Senate Bill 165, the first major revision to Ohio
oil and gas law in 25 years. Many significant changes
have or will be implemented as a result of passage of this
new legislation which became effective on June 30, 2010: